1. Technical Field
The present disclosure relates to processing closed loop cards and more specifically to converting or transferring funds on closed loop cards to gift codes usable at multiple merchants.
2. Introduction
Gift cards are widely used as gifts for birthdays, Christmas, and other holidays. Gift cards are closed loop cards, meaning that the value represented by a gift card is a valid form of payment at a closed set of retailers. For example, an Outback Steakhouse® gift card is only redeemable at Outback Steakhouse® and not at Planet Hollywood® or Target®. Some closed loop cards are valid at a family of closely related or commonly owned merchants. For example, a Darden Restaurants gift card is valid at Red Lobster® and Olive Garden®, or a local mall gift card is valid at tenant merchants in the local mall. Open loop cards, in contrast, are a valid form of payment at virtually every retailer nationwide, such as Visa® or Mastercard® debit cards.
While gift cards are a popular alternative to giving cash or a merchandise item which the recipient may not like, the recipient may not be able to redeem the gift card due to geographic limitations, personal disinterest in the merchant who issued the gift card, or other reasons. Additionally, some merchants issue gift cards with significant restrictions, complex fees, and/or an expiration date. According to one estimate, consumers purchase about $80 billion worth of gift cards annually in the U.S. and roughly 10%, or $8 billion, of that amount goes unredeemed. Consumers waste these unredeemed funds and do not benefit from the full value of the gift card. Further, if these funds are not spent, they can escheat to the state.